Has Austerity Succeeded in Ameliorating the Economic Climate? The Cases of Ireland, Cyprus and Greece

Abstract

The Great Recession that began in 2008 hit the economy of the European Union extremely hard. The year 2009 brought decline to the majority of the member states, inducing a desperate crisis management process. The few common EU-level crisis management measures that were implemented have brought about little success due to the modest volume of the common budget and the inertia of decision making attempting to harmonize often contradicting interests. As there was no credible crisis management at the EU level, most member states introduced their own set of measures. The efficiency of these was influenced by the economic performance of primary trading and investing partners, and by the volatility of the bond markets. In terms of economic performance, member states of the EU followed various paths and experienced various levels of recession in 2009, then various levels of upswing in 2010-2011, only to be hit by a second wave of recession of various extents after 2011. Although many member states took their own measures, general tendencies in crisis management can be defined. At first, the restoration of the functioning of the markets was targeted by generating additional demand through fiscal stimulus, but was then gradually replaced by imperative fiscal consolidation and austerity measures. The effectiveness of austerity programs is questionable: while the bond markets' volatility called for the correction of fiscal balances, tax hikes and governmental spending cuts tendentiously pushed back economic performance and postponed recovery, making economic growth possible only by increasing public debts. In this study, I present arguments in favour of the view that, in the current economic climate of the EU, prosperity could not be restored exclusively by austerity. Accordingly, I present case studies of the three member states with the largest increases in public debts: Ireland, Cyprus and Greece. My aim is to assess the efficiency of these member states' crisis management procedures: whether state interventions financed by public debt could result in economic recovery. I also argue that, given the current economic situation, the recovery in these member states in times of crisis is not foreseen.

The Impact of Fiscal Policies on the Socioeconomic Determinants of Health

“…As in the case of Germany, various authors have pointed out that the effect of either type of fiscal policy may well depend on the situation preceding the crisis. 25,29,41 For example, in South Korea the positive results in terms of employment were partly attributable to the favourable pre-crisis fundamentals (e.g. ample amount of foreign reserves, improved financial positions of firms), which had been restructured after the 1997–8 Asian crisis.…”

Towards an Understanding of the Dynamics of Work and Employment Relations during Austerity

“…Austerity measures are often ratified in situations where the sustainability of public finances is in doubt (Born et al, 2014). The Great Recession materialized as a financial crisis in the USA in 2008/09 after the default of financial giant, Lehman Brothers, generating a seismic wave in realty markets and intensifying the derived mortgage market crisis (Végh, 2014). The high level of loan defaults led to a drop in the value of mortgages supported by securities.…”

“…Beginning in 2009, many EU nations began applying constricting policies, giving reduced significance to social concerns while shouldering the risk of slow economic growth and unemployment (Michael & Christofides, 2020;Végh, 2014). The philosophy of austerity gradually developed against the framework of suggestions from authorities who opposed Keynesian finances, and became the central method for several governments for steering their country out of recession (Parnell, Millward, Widdop, King, & May, 2018).…”

EU member states’ ability to attract intellectual capital in times of crisis

“…However, at the same time, It is not less exciting that some member states in the upper left quadrant of Figure 2 who had suffered greatly from the crisis (Portugal, Cyprus, Latvia, Spain) could improve their relative positions in attracting intellectual capital, despite the measurable loss in their GDP. This implies that the adjustment made in the respective economies may well have been judged positively in the eyes of investors, even if economic recovery in most of these countries is yet to come (Végh 2014). It is similarly positive that Greece could at least keep its ability to attract intellectual capital, despite the exceptional fallback of its GDP during the crisis.…”